In early December, Amazon gave the world a sneak peek at what the future of grocery shopping could look like. By using smartphones, sensors and artificial intelligence, the Amazon Go store would eliminate lines and cashiers and let customers pay for their groceries without even opening their phones. It is a bold vision of the future that would likely have major implications for the millions of people who now work in supermarkets, but Amazon isn’t the only company with such plans.
While Amazon Go was making national headlines and piquing the public’s curiosity on how technology can upend supermarkets, three Harvard Business School alumni have been working on their own ambitious plan to disrupt the way supermarkets operate and turn grocery shopping into a hassle-free and more affordable experience. Unlike Amazon Go, however, this new venture is envisioning a world where you can order your groceries online and pick them up on the way home within 30 minutes of the order, without having to go inside a store or pay an extra fee. And it would only require a tenth of a traditional supermarket workforce with a footprint 15 times smaller than that of a regular grocery store.
This is Takeoff Technologies, a new Boston-area startup that plans to make its vision possible with the development of mini-warehouses using grocery-sorting robots to assemble orders. But instead of forming its own supermarket chain, the startup is planning to sell its technology infrastructure to existing companies like Whole Foods as a new way to reach customers.
Takeoff plans to open five sites next year with three retail partners and it has already talked to three national and regional grocery retail companies for potential partnerships, BostInno has exclusively learned.
The venture recently raised $3 million from angel investors and has received commitments for an additional $6.5 million in Series A funding, Takeoff’s founders told us, though they declined to name any of the investors.
The three HBS alumni behind Takeoff is José Vicente Aguerrevere, a founder of a Venezuelan grocery store chain who previously worked as a management consultant for Booz Allen & Hamilton; Max Pedró, a former vice president of international financial services at Walmart; and Rafael Pieretti, a former surgery fellow at Massachusetts General Hospital who has previously co-invested in Venezuelan health initiatives with Aguerrevere after the two first met in kindergarten.
“I’m really excited about the idea we’re getting together, the team, the investors. I think we’re laying out the table for something really big,” Pedró told me in a recent meeting at the Cambridge Innovation Center, where Takeoff is based.
According to a Business Insider report last year, food and beverage is the largest retail category in the U.S. with $600 billion a year in sales. However, it only represents less than 1 percent of online purchases made. To Aguerrevere, that means not enough has been done to make online grocery shopping appealing.
For instance, Aguerrevere pointed to Instacart, the venture capitalist-backed grocery delivery service based in San Francisco. While the company can deliver groceries in one hour as part of its Instacart Express service, the service itself costs customers $149 a year. It’s also very expensive for Instacart to operate such a major workforce, which is one reason why VC firms are starting to lose interest in on-demand startups as big money-making enterprises. “You can’t raise prices on consumers, and you can’t cut labor costs,” Venky Ganesan of Menlo Ventures told Reuters. “The core unit economics didn’t make sense.”
To Aguerrevere, the solution is to stop focusing on delivery and instead focus on creating pick-up locations near where consumers live, work or commute — which is a major part of how Takeoff plans to make its model viable. That way, someone can order their groceries online before leaving work and have the order ready for pick up on the commute back home.
“The whole purpose of Takeoff is to give back the time people spend walking down the aisle in a supermarket,” he said.
The way Takeoff envisions it, these mini-warehouses will be around 3,000 square feet, which is enough space to fit behind a gas station or pharmacy, and it could include products from multiple retailers, giving customers potentially more choice than if they were to go to one store. They also expect these micro fulfillment centers to only require 12 full-time employees.
By cutting down on labor and real estate with the use of technology, Takeoff appears to be following the advice of former Stop & Shop CEO Jose B. Alvarez and two of his colleagues who published the book “Retail Revolution: Will Your Brick-and-Mortar Survive.” In the 2015 book, the three authors write that in order to survive the major disruption of ecommerce, retailers must figure out how to optimize technology, inventory, people and space.
“If store based retailers cannot figure out how they can put these assets together efficiently to create a unique and distinctive value proposition for customers, these assets will not return their cost of capital,” Rajiv Lal, one of the co-authors who teaches at Harvard Business School, said in an interview last year.
The biggest appeal of Takeoff, Aguerrevere said, is that order processing will be free and quick, with orders being prepared within 30 minutes. He said Takeoff will also let grocery retailers provide the same assortment of items, though he admitted they wouldn’t be able to offer customized items such as custom-cut meat.
“There’s no one silver bullet for every want and need,” Pedró chimed in. “This is why retail is still very fragmented. We’re cracking the code for efficiently addressing your needs.”
Outside of convenience, however, Aguerrevere said Takeoff’s efficient use of space and labor will also allow grocery retailers to “dramatically” lower prices.
While lower grocery prices can have a broad impact, especially on lower-income families, Takeoff’s robotics-driven model is also primed to take away the jobs of many people who would benefit — something that Aguerrevere and his two co-founders acknowledge as a real consequence of automation. However, Aguerrevere said, he thinks Takeoff will have a net positive effect.
“There will be some winners and losers but the economy as a whole is gonna be better, because at the end of the day the prices are going to be lower,” he said.
Pedró, who met Aguerrevere while they were at HBS, put it in a more blunt way.
“It’s a huge question, what will robotics do to the world?” he said. “My short answer is you can’t stop progress. The reality is, people will get re-trained but the efficiencies to the entire society are so big that, boy it’s worth it. Boy it’s worth it.”